4 Things to Remember about Personal Loans for Bad Credit

[Sep 9, 2009.]

 

Personal loans for people with bad credit are tough to qualify for these days. But it's not totally impossible to get one. Since there is no shortage of ads for lenders offering personal loans for bad credit, it could pay to spend some time researching some of these offers. Borrowers can begin their hunt for a personal loan here, but it's important to remember these 4 important things.

You May Be Turned Down by Lenders

Lenders have tightened lending standards to the point where even people with good credit are having a tough time getting personal loans. If a borrower has had some financial problems in the past, he or she may be denied a personal loan unless a lender regularly works with people with bad credit.

Paying the Price for Bad Credit

Borrowers who really need a loan shouldn't get discouraged too soon. Personal loans for bad credit do exist. They just come with much higher interest rates than those offered to people with higher credit scores. Lenders charge higher rates because they consider bad credit borrowers to be more risky. It's not uncommon for people with bad credit to pay interest of 13% and up for personal loans. But in many cases, that interest rate may still be lower than what a borrower would pay on a credit card.

Personal Loan Applications Go on Your Credit Report

Every time a borrower applies for a personal loan it will show up on his or her credit report. Although it's important to shop around for a personal loan, too many credit checks will lower a borrower's credit score. People looking for personal loans should take a look at their credit reports to make sure they know what they contain. Anyone who has applied for credit and been denied repeatedly can avoid any further damage to their credit score by ending their search for a loan.

Personal Loans Must Be Repaid

Some people think that if they get a personal loan all their financial problems will be solved. But the fact is that a loan must be repaid like any other bill. So people who are already struggling to stretch their income with their current financial obligations may be digging a deeper hole by getting a loan. Those who are experiencing financial hardship may be better off getting debt counseling than applying for a personal loan they will have trouble repaying.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.